Natural catastrophe insured losses hit $50 bln in H1; Swiss Re

Natural catastrophe insured losses hit $50 bln in H1 – Natural disasters contributed to a $50 billion surge in insured losses in the first six months of 2023 – the second highest rate since 2011 – according to a report released Wednesday by reinsurers Swiss Re. Severe thunderstorms made up 70% of insured losses, with February’s earthquake in Turkey, and Syria, the second-costliest disaster, accounting for the remaining 10%.

In the United States, storms accounted for $34 billion in insured losses, the highest amount ever in a half-year, while Florida and California’s extreme weather conditions forced insurers to halt sales in those states.

“Climate change is already being felt in the form of extreme weather events, such as heatwaves, drought, flooding and extreme precipitation,” said Jean-Claude Haegel, Group Chief Economist at Swiss Re.

Overall global economic losses totalled $120 billion, 46% above the ten-year average, Swiss Re added, with the insured losses up from $48 billion in the first six months of 2022.

“The above-average losses reaffirm a 5–7% annual growth trend in insured losses, driven by a warming climate but even more so, by rapidly growing economic values in urbanized settings, globally,” Martin Bertogg, Head of Catastrophe Perils at Swiss Re, said.

As insuring against natural catastrophe grows more expensive, underwriters issued a record amount of insurance-linked securities in the first half of the year, including catastrophe (cat) bonds, which pay the issuer in the event a predefined disaster occurs.

READ: Uncommon levels of damage from storms this year is upending US towns and the insurance industry

Cat bond issuance soared to $40 billion in the first six months of 2023 — more than double what it was a decade ago — as insurers protected themselves from natural disasters and high-risk/reward investors sought out attractive investments, according to a separate note from Morningstar.

Wind events in the United States, including tornadoes, hurricanes, and other natural disasters, accounted for nearly 70% of total issuance, the report said. Top investors in the cat bond market include Amundi in France, GAM group in Zurich, Schroders in Britain, and Twelve Capital in Switzerland, according to Morningstar.

Primary insurers are also beginning to look at capital markets, mostly due to capacity constraints, S&P senior director Dennis Sugrue told Reuters.

Natural cat bonds are also gaining traction in less well-known markets, including Europe, where inflation is a major driver of risk transfer needs for reinsurance and insurance companies, Sugrue said.

Should natural disasters become more common and intense, large funds will be drawn to the promise of higher returns, Morningstar analyst Paul Olmsted told Reuters, as more dangers will present them with more opportunities.

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